The Morning Update

The USD firms, oil prices extend gains, equity markets are mixed, and US yields ease as war risk continues. The US Dollar regains some footing after retreating from Thursday’s highs, as markets steady following a sharp repricing of global rate expectations. While the greenback’s rally has paused, it remains supported by safe-haven demand and rising US yields amid ongoing geopolitical tensions and elevated energy prices. However, broader hawkish shifts from other major central banks have tempered the dollar’s upside, with investors now focused on developments surrounding the Iran–US conflict. Global equity markets are mixed, with declines in Asian stocks and US futures offset by a modest rebound in European shares. Investor sentiment remains cautious amid ongoing tensions in the Middle East and concerns over energy-driven inflation. At the same time, rising bond yields signal expectations of tighter monetary policy, keeping overall risk appetite subdued. Elsewhere, oil prices are extending gains, while gold rebounds on safe-haven demand amid ongoing geopolitical uncertainty. Meanwhile, Bitcoin edges higher toward $70,500, showing resilience despite a cautious broader market tone. With a light economic calendar, focus will remain on the Iran/USA war updates for intraday direction.

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In the news. Iran renews Gulf strikes as oil steadies. Airlines draw up contingency plan over jet fuel shortage fears. Unilever is in talks to sell its food division to spice and sauce maker McCormick. Trump praises Japan's 'tremendous support' over Iran war. US-Israel strikes have destroyed Iran's ability to enrich uranium, Netanyahu says. Iran allows a handful of favoured ships through the Strait of Hormuz. Hawkish rate repricing halts the dollar's rally. Iran attacks wipe out 17% of Qatar's LNG capacity for up to five years. Gold set for worst week in six years as war curbs rate-cut bets. South Africa imposes anti-dumping duties on Chinese and Thai steel.

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In currency markets. The euro, yen and sterling are all heading for weekly gains against the US dollar, supported by increasingly hawkish signals from global central banks in response to war-driven inflation risks. The dollar, meanwhile, is under pressure from this shift in rate expectations and tentative stabilization in energy markets, even as oil prices remain sharply elevated. CNY firms 0.15%, while Asian currencies on average fell 0.25% against the USD. Trading currencies come under fresh pressure, with ZAR tumbling 1.6%, NOK weakens 0.75%, JPY, MXN, SEK & CZK retreats 0.6%, KWD, AUD & DKK easing 0.3%, and NZD & CHF are down 0.1% against the USD.

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In commodity markets. Oil prices advance 0.9%. Natural Gas, Coffee & Wheat prices slip 0.2%. Gold prices strengthen 1.1%. Silver prices gained 0.5%, and Soybean prices firmed 0.4%.

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CAD holds steady while outperforming its peers on strengthening key commodity prices, despite the US Dollar also firming in early trading. The currency remains range-bound near recent levels as investors await fresh catalysts. Canada’s Retail Sales are expected to rebound by around 1.5% month-on-month, with the release likely to drive near-term direction for CAD.

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EURCAD weakens in early trading as the Euro comes under pressure while the Canadian Dollar remains relatively resilient. The move reflects a modest pullback in EUR following mixed ECB signals, in contrast to CAD strength supported by firm commodity prices and steady domestic expectations. Near-term direction will likely hinge on ECB rhetoric and incoming Canadian Retail Sales data, which could reinforce the divergence between the two currencies.

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EUR falls back below 1.1550 as the pair extends its corrective move despite a more positive market mood, driven by a modest US Dollar recovery and profit-taking ahead of the weekend amid Middle East tensions. On the policy front, ECB commentary remains mixed, reflecting elevated uncertainty, with some officials signalling that rate hikes could be considered as soon as April if inflation risks intensify, while others emphasize a data-dependent approach with no predetermined tightening path.

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GBPEUR steadies below 1.1600 as the Pound slips slightly against the Euro in early trading. Sterling softens despite the BoE holding rates at 3.75%, with markets reassessing the policy outlook. Meanwhile, the Euro finds modest support as the ECB signals a cautious but flexible approach amid heightened uncertainty. Near-term direction will hinge on central bank guidance and geopolitical developments.

GBP weakens in early trading as the US Dollar strengthens during the European session, prompting a pullback from recent highs. Sterling is giving back some gains despite the Bank of England holding rates at 3.75%, with policymakers highlighting that the Middle East conflict could create an inflationary shock and keep price pressures elevated. The BoE’s tone was cautiously hawkish, signalling that policy may need to remain restrictive for longer, with markets even pricing some probability of future rate hikes. However, ongoing geopolitical tensions and broader policy uncertainty are likely to keep sentiment toward GBP restrained in the near term.